When you think about estate planning, you may assume that it is all about the execution of legally binding documents like wills and trusts. This is a large part of the endeavor, but the estate administration process is also something that you should take into consideration. There are hands-on tasks that must be completed to bring your final wishes to fruition, and we will examine the estate administration process in this blog post.
If you use a last will as your primary vehicle of asset transfer, you would name an executor in the document. This can be someone that you know and trust, but it is also possible to engage a professional executor. It is important to understand the fact that the administration of an estate can be complex, and it can be time-consuming. There are also legal risks that must be assumed by the executor. Professionals know exactly how to proceed, and they act in an unemotional manner free of any conflicts of interest.
Many people do not understand the fact that the executor is not allowed to handle the estate administration tasks without any supervision. The administrator would be required to admit the will to probate after the passing of the testator, and the probate court would supervise the administration of the estate. There are precise rules in place, and a professional executor would know exactly how to proceed during the probate process.
The assets that comprise the estate are identified and inventoried by the administrator. In many cases, the liquidation of property will be necessary. If anyone wanted to challenge the validity of the will, they would be given an opportunity to do so.
During this interim, the executor is required to notify creditors about the passing of the decedent, and they are given six months to come forward. When the court is satisfied that all of the final debts have been paid and the property has been prepared for distribution, the estate will be closed. At that point, the executor would distribute bequests to the inheritors. In Ohio, it will typically take somewhere in the vicinity of nine months for the probate process to run its course.
Aside from the last will, the other most widely utilized estate planning tool is the revocable living trust. There are similarities with regard to the living trust estate administration process, but there are also some differences. To explain the anatomy of a living trust, the grantor is the individual that establishes the trust. There is a trustee that acts as the trust administrator, and there is a beneficiary that can receive monetary distributions from the trust. (It is possible to have multiple beneficiaries.)
If you are the grantor of a revocable living trust, you can act as the trustee and the beneficiary while you are alive and well. We include the caveat “and well” because you could name a disability trustee to handle the administration chores if you were to become unable to make sound decisions at some point in time. This is a very useful benefit, because a significant percentage of elders experience incapacity late in their lives.
The purpose of the trust is to serve as an estate planning vehicle, so you name a successor trustee to administer the trust after you are gone. Once again, you can name an individual, but you also have the option of using a professional fiduciary entity to act as the trustee. Your heir that will be receiving distributions from the trust would be the beneficiary.
When the time comes, the trustee would follow your instructions and distribute the assets in the trust to the beneficiary. You can be very specific with regard to the way that you want the assets transferred. For example, you could allow for limited distributions over an extended period of time to prolong the viability of the trust.
The major difference between the administration of a will and a living trust is the matter of probate. When a living trust has been established, the probate court would not be involved in the asset distribution process. This is beneficial, because in many cases, assets can be distributed in a more timely and cost-efficient manner when the probate process is not a factor.
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